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Danger Ahead: Mike Pence Would Pick Up Where Paul Ryan Left Off
As long as we play along with the "solvency" game, Social Security is vulnerable to privatization.
Former Vice President Mike Pence is talking about privatizing Social Security. The remarks came Thursday, before an audience at the National Association of Wholesaler-Distributors summit in Washington, D.C. Here's the comment that's raising a lot of eyebrows:
I think the day could come when we could replace the New Deal with a better deal. Literally give younger Americans the ability to take a portion of their Social Security withholdings and put that into a private savings account."
After seeing a video clip from the event, I tweeted:
I've been writing about this kind of thing for decades, and I dedicated an entire chapter to Social Security in my book, The Deficit Myth.
In that chapter, I wrote about the following exchange between Congressman Paul Ryan (R-WI) and Federal Reserve Chairman Alan Greenspan. Mike Pence is just picking up where Paul Ryan (and before him President George W. Bush) left off. Click to watch the video, and then we'll brake it down.
It's clear where the Congressman wanted the Fed Chairman to go. In a courtroom, I believe this is called "leading the witness."
In teeing up his question, Ryan uses the phrase "personal retirement accounts" no less than four times.
Wouldn't it be a good idea, Ryan asks, to begin to transition to a system of "personal retirement accounts" in order to help the Social Security system "achieve solvency" and make benefits "more secure" for future retirees? This is exactly what Pence is talking about doing.
Ryan was hoping for a simple answer—Yes—from Alan Greenspan. Instead, he got the truth.
"There's nothing to prevent the federal government from creating as much money as it wants and paying it to someone." ~Alan Greenspan
Read that again. Rewind the tape. There is no solvency problem. There is not—nor can there ever be—any financial difficulty in meeting payment obligations to future retirees, their dependents, and the disabled.
Why?
As Greenspan explained in a speech in 1997:
That all of these claims on government are readily accepted reflects the fact that a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit. To be sure, if a central bank produces too many, inflation will inexorably rise as will interest rates, and economic activity will inevitably be constrained by the misallocation of resources induced by inflation. If it produces too few, the economy's expansion also will presumably be constrained by a shortage of the necessary lubricant for transactions. Authorities must struggle continuously to find the proper balance.
It was not always thus. For most of the period prior to the early 1930s, obligations of governments in major countries were payable in gold. This meant the whole outstanding debt of government was subject to redemption in a medium, the quantity of which could not be altered at the will of government. Hence, debt issuance and budget deficits were constrained by the potential market response to an inflated economy. It was even possible in such a monetary regime for a government to become insolvent.
As the lens of Modern Monetary Theory (MMT) constantly reminds us, the US dollar is no longer tethered to gold. The U.S. is not operating under a fixed exchange rate system. We have a fiat currency and a floating exchange rate. It is impossible for the government to "run out of money" or to face bills coming due that it cannot afford to pay.
Once you understand the nature of the monetary system we have today, it's easy to see why the arguments that people like Paul Ryan and Mike Pence are relying on to justify privatizing Social Security are totally without merit.
Every Democrat should be able to explain this in very simple terms: We don't need to address the solvency crisis in Social Security, because there is no solvency crisis.
As Warren Mosler put it:
You don't have to subscribe to MMT to arrive at this understanding. After all, Alan Greenspan got it. And as I've written numerous times before, Northwestern University Professor Robert Eisner got it too.
It's About Inflation Not Solvency!
What all of us—MMT economists, Alan Greenspan, and Bob Eisner—understand is that the real challenge is, well, just that. A real resource challenge.
Go back and listen to Greenspan's response again. After he tells Congressman Ryan that there's nothing to prevent a currency-issuing government from meeting its financial obligation to all beneficiaries (present and future), he goes on to make the really important point. The question, he tells Ryan, is "how do you set up a system which assures that the real assets are created which those benefits are employed to purchase?"
Think of it like this.
We are an aging society. Each day, roughly 10,000 Americans reach the age of sixty-five. As the elderly move out of the workforce and into retirement, they leave behind a smaller and smaller population of younger workers who must produce the lion's share of the real good and services that all of us rely on to meet our needs.
Our national debate should revolve around our changing demographics and our economic productivity, not some red-herring about Social Security's "solvency."
Imagine what would happen if we end up—in 10, 20, or 30 years—with a dwindling labor force and little productivity growth. Meeting our obligation to future retirees isn't primarily about sending them money each month. It's about helping them maintain a decent real standard of living, and that can only be realized by having access to the real things they need—health care, housing, food, leisure, entertainment, etc.
If democrats and republicans were having the right political debate, they would stop arguing about Social Security's so-called "solvency" and start arguing about who has the better immigration plan and whose policies will do more to boost productivity-enhancing investments in the years ahead.
For those interested in what it would mean to replace Social Security with a system of personal savings accounts, here's something I published in 2005, when George W. Bush was pushing the idea.
Have a great weekend, and thank you for subscribing to The Lens.
★★
https://stephaniekelton.substack.com/p/save-social-security-from-its-saviors
Save Social Security From its 'Saviors'
Stephanie Kelton Jul 3, 2022 43 26
Lately, I’ve been writing about Social Security (here and here). With everything else that’s’ commanding our attention at the moment, it’s not a topic that feels particularly urgent. It soon will.
The debates have already started, and I expect them to heat up after the midterms. Just think back to what happened after the midterm shellacking in 2010, when a newly-emboldened group of republicans lawmakers joined forces with a group of so-called “moderate democrats” to push for cuts to Social Security as part of a “Grand Bargain.”
Of course, no one ever comes right out and says they want to CUT Social Security. That would be political suicide. Instead, lawmakers—democrats and republicans—describe their positions as well-intentioned and grounded in the harsh reality of budgetary math. They want to SAVE Social Security.
Robert Eisner, who spent most of his career as a professor of economics at Northwestern University, was onto this charade.
In 1998, Eisner published an article called “Save Social Security from its ‘Saviors’.” I strongly encourage you to read the entire thing.
In addition to that article, Eisner wrote a number of books and op-edsabout Social Security. He was frustrated by the policy debates, which he saw as entirely misguided. Here’s the closing sentence from an op-ed he published in The Wall Street Journal in 1997.
Politicians and pundits should stop playing games with a confused public, and focus on total spending and total taxes, how they affect the economy, who gains and who loses.
If you go on to read the article I recommended, you’ll see that Eisner echos this little-known fact made by MMTers like Warren Mosler.
Eisner’s main message was that the obsession with Social Security’s Trust Funds (OASI and DI) is a distraction. To borrow a phrase from Gertrude Stein, “There is no there there.” The trust funds exist merely as accounting entities. We don’t need them to carry a positive balance—or any balance whatsoever—in order to preserve Social Security for future generations. Here’s Eisner:
Expenditures alleged to be related to trust funds are often less than their income—witness the highway and airport funds as well [as] Social Security. There is no particular reason they cannot be more. The accountants can just as well declare the bottom line of the funds’ accounts negative as positive—and the Treasury can go on making whatever outlays are prescribed by law. The Treasury can pay out all that Social Security provides while the accountants declare the funds more and more in the red.
The only conceivable problem, as I explained last week, is with the way the enacting legislation was written.
Congress could “fix” Social Security simply by amending that legislation to grant the Old-Age and Survivor’s Insurance (OASI) and Disability Insurance (DI) programs the same federal backstopping that already guarantees program solvency for the Supplemental Medical Insurance (SMI) Trust Fund.If for some reason we choose to perpetuate the myth that the trust fund balances are vital to the program’s “solvency,” Eisner had this to say:
For those concerned, nevertheless, about the ‘solvency’ of the trust funds, there are simple, painless remedies for this accounting problem.
What he strongly opposed were the kinds of “remedies” that are often proposed in the name of “saving” Social Security—means-testing, raising the retirement age, reducing cost-of-living adjustments, diverting payroll contributions into privatized accounts, etc.
The proposed nibbling away of Social Security, including that by some of its presumed friends, is disingenuous and misleading. Even some of its defenders seem all too ready to accept ‘minor’ cuts in benefits to achieve prospective fund balance.
Eisner might have tweaked an old adage, “With saviors like these, who needs executioners?”
Under current law, OASI, DI, and HI are authorized to pay statutory benefits—i.e. what beneficiaries are entitled to under the law—only if there are adequate financial resources to cover those obligations.
その「救世主」から社会保障を救う
その「救世主」から社会保障を救う
ステファニー・ケルトン 2022 年 7 月 3 日 43 26
最近、私は社会保障について書いています (こことここ)。現時点で私たちの注意を喚起している他のすべてのことを考えると、それは特に緊急に感じられるトピックではありません. もうすぐです。
議論はすでに始まっており、中間選挙以降は熱くなるだろう。2010 年の中間弾圧の後に起こったことを思い出してください。新たに勇気づけられた共和党議員のグループが、いわゆる「穏健な民主主義者」のグループと力を合わせ、「大交渉」の一環として社会保障の削減を推進しました。 "
もちろん、すぐに出てきて、社会保障を削減したいと言う人はいません。それは政治的自殺だろう。代わりに、民主党と共和党の議員は、彼らの立場を善意であり、予算計算の厳しい現実に基づいていると説明しています。彼らは社会保障を救いたいのです。
キャリアのほとんどをノースウェスタン大学の経済学教授として過ごしたロバート・アイズナーは、このシャレードに乗っていました。
1998年、アイズナーは「救世主から社会保障を救え」という記事を発表した。全体を読むことを強くお勧めします。
その記事に加えて、アイズナーは社会保障に関する多くの本と論説を書きました。彼は、政策論争が完全に見当違いであると見なしたことに不満を感じていました。これは、1997 年にウォール ストリート ジャーナルに掲載された論説の結びの文です。
政治家や専門家は、混乱した大衆とのゲームをやめ、総支出と総税金、それらが経済にどのように影響するか、誰が得をし、誰が損をするかに注目すべきです。
私が推奨する記事を読み進めると、Eisner が、Warren Mosler のような MMTer によって作成されたこのあまり知られていない事実を反映していることがわかります。
アイズナーの主なメッセージは、社会保障の信託基金 (OASI と DI) への執着は気を散らすものであるというものでした。ガートルード・スタインの言葉を借りれば、「そこには何もない」。信託基金は、単に会計主体として存在します。将来の世代のために社会保障を維持するために、彼らがプラスのバランスをとる必要はありません。アイズナーは次のとおりです。
信託基金に関連していると主張される支出は、多くの場合、彼らの収入よりも少なくなります。高速道路や空港の基金、社会保障などを目撃してください。それ以上にならない特別な理由はありません。会計士は、ファンドの決算のマイナスをプラスと宣言することもできます。財務省は、法律で規定されている支出を実行し続けることができます。財務省は、会計士が資金をますます赤字で宣言している間、社会保障が提供するすべてを支払うことができます。
先週説明したように、考えられる唯一の問題は、制定法がどのように書かれたかということです。
議会は、老齢および遺族保険 (OASI) および障害保険 (DI) プログラムに、補足医療保険 (SMI) 信託基金のプログラムの支払能力をすでに保証しているのと同じ連邦政府のバックストップを与えるようにその法律を修正するだけで、社会保障を「修正」することができます。 .何らかの理由で、信託基金の残高がプログラムの「ソルベンシー」に不可欠であるという神話を永続させることを選択した場合、アイズナーは次のように述べています。
それでもなお、信託基金の「ソルベンシー」について心配している人々のために、この会計上の問題に対する簡単で苦痛のない解決策があります。
彼が強く反対したのは、社会保障を「貯蓄する」という名目で提案されることが多い種類の「救済策」でした。資力調査、退職年齢の引き上げ、生活費の調整の削減、給与拠出金の民営化口座への転用などです。 .
提案されている社会保障をかじることは、その推定上の友人の何人かによるものも含めて、不誠実で誤解を招くものです。その擁護者の一部でさえ、将来の資金収支を達成するために、利益の「わずかな」削減を受け入れる準備ができているようです.
アイズナーは、「このような救世主がいれば、誰が死刑執行人を必要とするでしょうか?」という古い格言を微調整したかもしれません。
現行法の下では、OASI、DI、および HIは、法定給付 (つまり、受益者が法の下で受け取る権利があるもの) を支払う権限を与えられていますが、これらの義務をカバーする十分な財源がある場合に限られます。
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